Regional variation in tax compliance and the role of culture

Abstract

AbstractThis research note analyzes the role of culture on individuals’ tax compliance by focusing on regional differences within a single country: Italy. Southern Italy has long been a focus of research interest, not only for its high rates of tax evasion, but for a host of other social and political ills, all usually attributed to regional culture. Our laboratory tax compliance experiment, conducted in provinces of the northern and southern regions, reveals that taxpayers in the north and south generally behaved alike both in terms of average compliance rates and individuals’ sensitivity to changes in tax structures—except for lower responsiveness to greater redistribution of tax revenues among subjects in Salerno than those in Bologna. This suggests the limited explanatory power of culture in tax compliance in favor of institutional explanations.